CGMA TOOL How to Develop a Strategy Map Introduction 2 The Strategy Pyramid 3 Step 1: Specify an Overriding Objective 5 Step 2: Choose the Value Proposition 6 Step 3: Choose the Financial Strategies 7 Step 4: Choosing the Customer Strategies 8 Step 5: Execute Through the Internal Perspective Strategies 9 Step 6: Plan the Learning and Growth Strategies 10 Validating and Cascading the Strategy Map 11 Conclusion 12 1 COnTEnTS Two of the world’s most prestigious accounting bodies, the AICPA and CIMA, have formed a joint venture to establish the Chartered Global Management Accountant (CGMA) designation to elevate the profession of management accounting. The designation recognises the most talented and committed management accountants with the discipline and skill to drive strong business performance. CGMA TOOL – How to Develop a Strategy Map2 InTrODuCTIOn The vast majority of organisations have well-defined procedures for developing strategic plans. And for the most part, the result of their planning exercises are good, solid, strategies designed to move the entity forward and provide sustainable, even superior, returns. But there is often a major disconnect between the formulation and execution phases of strategy. The ability to cascade an organisation’s vision, mission and core strategies into actionable behaviours that achieve critical objectives continues to be a challenge for most organisations. As the saying goes, “a picture is worth a thousand words.” Strategy maps, pioneered by Balanced Scorecard founders Robert Kaplan and David Norton, allow organisations to describe and communicate their strategies concisely and succinctly and close the gap between formulation and successful implementation of strategy. Strategy maps describe how organisations create value by building on strategic themes such as “growth” or “productivity.” These themes determine what specific strategies organisations will adopt at their customer, process, and learning and growth levels. Well-constructed maps describe how the organisation plans to meet its specific customer promises through a combination of employee, technology and business processes that satisfy customer expectations and meet shareholder demands. 3 THE STrATEGy PyrAMID Mission Why We Exist Values What’s Important to Us Vision What We Want to Be Strategy Our Game Plan Strategy Map Translate the Strategy Balanced Scorecard Measure and Focus Targets and Initiatives What We Need to Do Satisfied Shareholders Efficient and Effective Processes Delighted Customers Motivated and Prepared Workforce Figure 1: Strategy Pyramid Strategy maps can be, and often are, used as standalone tools that organisations employ to develop, understand and convey their strategic story. To maximise their value, however, they need to be seen and used as core building blocks in an aligned strategy initiative. Figure 1 highlights where the strategy map and ...

1. CGMA TOOL
How to Develop
a Strategy Map
Introduction 2
The Strategy Pyramid 3
Step 1: Specify an Overriding Objective 5
Step 2: Choose the Value Proposition 6
Step 3: Choose the Financial Strategies 7
Step 4: Choosing the Customer Strategies 8
Step 5: Execute Through the Internal Perspective Strategies 9
Step 6: Plan the Learning and Growth Strategies 10
Validating and Cascading the Strategy Map 11
Conclusion 12
1
COnTEnTS
Two of the world’s most prestigious accounting bodies, the

2. AICPA
and CIMA, have formed a joint venture to establish the
Chartered
Global Management Accountant (CGMA) designation to elevate
the
profession of management accounting. The designation
recognises
the most talented and committed management accountants with
the
discipline and skill to drive strong business performance.
CGMA TOOL – How to Develop a Strategy Map2
InTrODuCTIOn
The vast majority of organisations have well-defined procedures
for developing strategic plans. And for the most part, the result
of their planning exercises are good, solid, strategies designed
to move the entity forward and provide sustainable, even
superior,
returns. But there is often a major disconnect between the
formulation
and execution phases of strategy. The ability to cascade an
organisation’s
vision, mission and core strategies into actionable behaviours
that achieve critical objectives continues to be a challenge for
most organisations.
As the saying goes, “a picture is worth a thousand words.”
Strategy
maps, pioneered by Balanced Scorecard founders Robert Kaplan
and David Norton, allow organisations to describe and
communicate
their strategies concisely and succinctly and close the gap

3. between
formulation and successful implementation of strategy. Strategy
maps describe how organisations create value by building on
strategic
themes such as “growth” or “productivity.” These themes
determine
what specific strategies organisations will adopt at their
customer,
process, and learning and growth levels. Well-constructed
maps describe how the organisation plans to meet its specific
customer promises through a combination of employee,
technology
and business processes that satisfy customer expectations
and meet shareholder demands.
3
THE STrATEGy PyrAMID
Mission
Why We Exist
Values
What’s Important to Us
Vision
What We Want to Be
Strategy
Our Game Plan
Strategy Map

4. Translate the Strategy
Balanced Scorecard
Measure and Focus
Targets and Initiatives
What We Need to Do
Satisfied
Shareholders
Efficient and
Effective Processes
Delighted
Customers
Motivated and
Prepared Workforce
Figure 1: Strategy Pyramid
Strategy maps can be, and often are, used as standalone tools
that
organisations employ to develop, understand and convey their
strategic
story. To maximise their value, however, they need to be seen
and
used as core building blocks in an aligned strategy initiative.
Figure 1
highlights where the strategy map and Balanced Scorecard fit in
the
overall strategic management process.
Personal Objectives

5. Strategic Outcomes
CGMA TOOL – How to Develop a Strategy Map4
Maximise Organisational Value
Revenue Growth Strategy Productivity Strategy
Increase
Revenue per
Customer
Add/Retain
High-Value
Customers
Current Migrated New New Offerings Scalability Strategies
(eg Web)
Customer
Management
Leadership
Innovation &
Commercialisation
Supremacy
Internal
Operations
Excellence
Effective

6. Governance &
Control
Perception;
Public
Relations
Reduce Cost
per Customer
1) Human Capital
(Staff competencies)
2) Information Capital
(Technology infrastructure)
3) Organisation Capital
(Climate for action)
Fina
ncia
l
W
hat w
e w
ant to accom
plish
H
ow

7. w
e plan to accom
plish it
Custo
m
er
Interna
l
Lea
rning
&
G
ro
w
th
Solution
s
Focus
Completed Generic Strategy Map

8. Asset Utilisation
Figure 2: Generic Strategy Map
This tool provides an integrated view of the development
of a strategy map. The steps are:
1. Specify an overriding objective.
2. Choose the value proposition.
3. Choose the financial strategies.
4. Choose the customer strategies.
5. Execute through the internal perspective strategies.
6. Plan the learning and growth strategies.
Steps 1 through 4 of the strategy mapping process
address the question, “What do we want to accomplish?”
Steps 5 and 6 address the question, “How do we plan
to accomplish our objectives?” The completed generic
strategy map (Figure 2) illustrates how the financial and
customer-focused goals of the organisation are linked

9. to the underlying internal processes and learning and
growth strategies necessary to deliver on those goals.
Strategy Mapping – A Six-Step Process
5
There is considerable confusion on this point.
Many mission and vision statements are often
mistakenly portrayed as the ultimate objective
to be achieved – satisfied customers, service excellence,
best-in-field, market leader, low-cost provider and
so on. Indeed, these are critical outcomes and are
highly desired by all organisations. However,
for profit-making organisations, the overriding
objective must be economic.
There is no question that serving customers effectively,
developing new and unique products and achieving
market dominance are worthy objectives. But in a
profit-making environment, these are all the ingredients
for success, not success itself. Success is achieved by
significant revenues and/or cost containment that lead to

10. superior economic returns — the overriding objective.
The overriding objective should be the first element of
the strategy map. It should contain a financial target and
a time dimension. Examples of an overriding objective
could be:
• Increase return on capital employed by 6% within
three years
• Increase profit margin from 8 to 12% and net cash flow
from $500,000 to $750,000 within five years
• Increase target share price by 20% by next reporting date
• Increase total shareholder return relative to benchmark
by 10% within two years
Overriding objectives are the first item to appear
on a strategy map.
STEP 1: SPECIFy An OVErrIDInG ObjECTIVE
In the next few years, what will it take to succeed? This first
step

11. is critical because it links the strategy map to the earlier phase
of creating/reaffirming an organisation’s mission, core values
and vision. This step must differentiate between what the
organisation truly understands as its overriding objective
and the strategies it plans to implement.
CGMA TOOL – How to Develop a Strategy Map6
1. Operational excellence
(also referred to as best total cost)
2. Product leadership
3. Customer intimacy
(also referred to as customer solutions)
As Table 1 indicates, three images can make an
organisation stand out. Companies focused on
operational excellence will use price as the key driver
of the “best deal” image. The next image is the
“best product or service.” Companies that decide to
compete here are using the product leadership value

12. proposition, and will use unique attributes and features
in their products and services as their main image
driver. The third and final image is that of the “best
friend.” Companies that compete in this area follow
the customer intimacy value proposition, providing
solutions to their customers.
Table 1: The Value Propositions
STEP 2: CHOOSE THE VALuE PrOPOSITIOn
Operational Excellence Product Leadership Customer Intimacy
Price
Primary focus: very low
prices; Image: “Best deal”
High end of pricing High end of pricing
Unique attributes
Meets threshold
standards
Primary focus: very
unique attributes;

13. Image: “Best product/
service”
Meets threshold
standards
Relationship level
Low end of threshold
standards
Meets threshold
standards
Primary focus: very high
customer intimacy;
Image: “Best friend”
Value
Proposition
External
Image
The second step in strategy mapping is to choose the value
proposition

14. that will help the organisation win the market. The idea behind
the value
proposition approach is to choose one dominant value
proposition,
and provide breakthrough customer value in it. For the two
propositions
not chosen, it is imperative not to lead but to compete, at least
to some
threshold level. The three value propositions put forth by
Treacy and
Wiersema provide an excellent framework for competing
in today’s markets:
7
1. Revenue growth
2. Productivity
3. Asset utilisation
All organisations must pay some level of attention to
each of these strategies. However, the choice of value

15. proposition in Step 2 helps dictate which of the three
will dominate and where to spend most of the effort and
activity. Table 2 below indicates the types of financial
strategies companies pursue based on the choice of value
proposition. By aligning financial strategies with the
value proposition, companies can position themselves to
properly decide what customers are willing to purchase.
Knowledge of the value proposition assists
organisations to pinpoint which of the three
financial strategies will dominate. Table 2 illustrates
that organisations pursuing operational efficiency
propositions will focus on reaching their overriding
objectives primarily through productivity and
asset utilisation strategies. Organisations following
customer-intimate or product leadership propositions
will put less focus on these efficiency strategies, instead
attempting to grow revenue through unique product
or customer features.
STEP 3: CHOOSE THE FInAnCIAL STrATEGIES
Operational Excellence Product Leadership Customer Intimacy
Revenue Growth

16. Competitive prices
Volume
Premium pricing
New features
Bundling
Cross-selling
Productivity
Tight variable and
discretionary cost control
Control but also spend
on R&D and marketing
Control but also spend
on solution selling
Asset utilisation
Maximise inventory

17. turnover
Utilise fixed assets to
reduce product cost
Utilise fixed assets
in pursuit of
product leadership
Utilise fixed assets
in pursuit of
customer intimacy
Value
Proposition
Financial
Strategy
Table 2: Financial Strategy Chart
Having established the value proposition, organisations next
formalise
their plans and strategies around revenues and costs. Financial
strategies can be categorised into three key areas:

18. CGMA TOOL – How to Develop a Strategy Map8
1. Retaining and adding customers
2. Increasing revenue per customer
3. Reducing cost per customer
Organisations must pay attention to each of these
strategies. However, the choice of value proposition once
again dictates where the firm should focus its effort and
activity. Table 3 indicates the types of customer-focused
strategies companies tend to pursue based on the value
proposition chosen.
STEP 4: CHOOSInG THE CuSTOMEr STrATEGIES
Operational Excellence Product Leadership Customer Intimacy
Retain and add
customers

19. Competitive prices
Latest technologies
Newest features
Loyalty programs
Word-of-mouth
Increase revenue per
customer
Competitive prices
New features
“Add-on” products and
services